Whether you’re buying or selling, a home warranty can keep surprise expenses from leaving you strapped for cash.

You’ve heard the horror stories – within weeks of purchasing a home, the hot water heater leaks, the HVAC suddenly stops working or the freezer becomes a puddle of melted ice. But what if there was a way to protect against major house-related expenses?

A home warranty, simply put, covers the repair or replacement of many of the working parts of your home. There are numerous companies and plans to choose from, so let’s take a closer look at the options.

Choosing a Company. A simple Google search for home warranties will result in dozens of different companies claiming to provide your house with the ultimate protection.

While many companies claim to be nationwide, ultimately your main concern is if they will provide timely, effective service whenever called upon. The warranty company will contract the work out to local professionals based on the description of problems you give to the claim center.

Check for local reviews of the warranty company to make sure other people in your area have had positive results, with both the company itself and the contractors used.

Discussing the various choices in warranty companies with your local real estate agent can prove incredibly useful. It’s likely they’ll have experience with multiple companies and have heard directly from clients about their satisfaction with the results.

What is Covered. While the specifics of each category may vary from company to company, the majority of home warranty companies all cover the following components of your house: heating and cooling systems, plumbing, electrical, water heater and appliances.

Depending on the company selected, you are likely to find an a la carte menu of additional coverage options, each at their own cost, from which you can choose to further cover your home’s systems. An additional refrigerator or a well system would be examples of add-on items.

During your home buying experience, you’ll likely have a home inspection done to determine the efficacy of all the working parts of your house. Use this as a guide to select which items will need coverage above and beyond the basic parameters of the home warranty.

The Cost. A home warranty often costs between $400 and$500 for the basic plan, which offers one year of coverage. Typically, a $75 to$100 deductible is paid for each claim.

In an effort to reduce costs, ask if the warranty company offers multi-year discounts or guaranteed pricing when setting up your warranty plan. Some companies also offer payment plans so you can spread the cost over several months, if paying a lump sum is not possible.

How it Works. Having selected the home warranty company, you then need to set up an account. This can either be done by you or, if you’re in the midst of the home buying process, a task your real estate agent can often handle for you.

Should any of the covered components stop working, your first call must be to the claim center of the warranty company. Do not try to fix it yourself and, by all means, do not call “your guy” to come and take care of it. Warranty companies have contracts with specific vendors and if you employ anyone other than one of these selected vendors, it is very likely any repairs made will not be covered.

Once you’ve filed a claim, a technician will be dispatched to your house at the warranty company’s earliest convenience to assess the situation. Mostly likely, the problem will be resolved on that visit. If not, all parties will work together to provide a solution that is satisfactory to you. Whether it takes one visit or two, the resulting work will end in a fully functioning system, potentially saving you thousands of dollars.

Not Just for Home Buyers. A home warranty can be an extremely useful tool for home buyers and sellers alike. Many companies offer options to cover the home seller through the listing period and then transfer over to the buyer at settlement.

Not only does a warranty give the seller the comfort of knowing their home’s systems will be covered during the listing period, it’s also an excellent marketing tool to attract potential buyers. This is especially true in homes that have major appliances or systems reaching the end of their expected lifespan.

A Final Thought. The major benefit of a home warranty is completely obvious. For one year, you’re guaranteed to not lose any sleep over the vast majority of major expenses should something break in your home.

However, home warranties allow you to do much more than sleep well. Buyers will often find themselves worried over the sudden loss of a financial cushion after settlement. For the small price of a home warranty, you can not only rebuild your financial stores without the threat of an unexpected financial burden from your new home, but effectively budget for making any necessary changes on your own schedule in the future. ~Ray Boss Jr.